Monday, 18 April 2016

The EU is losing its grip on the single market

The treasury estimation of the EEA solution costing £2600 per household per annum by 2031 could not be more irrelevant. It makes one very significant and fundamentally flawed assumption that the EU controls the single market. The EU has been steadily losing its grip on the single market for some time and by 2031, it will not control the single market at all. The clue is in a UNECE tweet earlier today on the UNECE working party on perishable foodstuffs. Arcane I know. Stay with me.

The primary functions of Working Party 11 are to develop and update the Agreement concerning the International Carriage of Perishable Foodstuffs and to promote the facilitation of international transport of perishable foodstuffs by harmonising the relevant regulations and rules and the administrative procedures and documentation requirements to which this refrigerated transport is subject. 49 countries are parties to the agreement including three, Morocco, Saudi Arabia and Tunisia, from outside the UNECE region.

This is just one of many is a massive matrix of global regulators. That is a global region which conforms to the same standards throughout, and most of ratifying states have a tariff agreement with the EU of some kind. At present it is not a single market. But when you add the Paris Memorandum of Understanding (MOU), TIR and the various mutual recognition agreements embodying ISO standards and the likes, it very much starts to look like a global single market.

What's more, development of these happens all the time in back-room committee meetings in Geneva and elsewhere, all working inside the framework of the WTO Trade Facilitation Agreement. The activity is ongoing, every week. Item by item, common agreement is reached.

There are no big jamborees or trade delegations or red carpets. It's grey officials sitting in rows voting on motions. If agreements are reached then they become treaty revisions and the standards are updated. But that's just concerning one area of trade. There is also the IMO's agreement on container weighing, UNECE standards and UN regulations on vehicle design, emissions and safety. Then there are the various Codex committees. There is a committee or body for just about everything you can imagine.

And because all these nations all agree to the same standards, the EU has little choice but to adopt them as its own. And while it is an influential bloc, commanding a majority within it, the WTO is in the process of pushing more and more nations into abiding by Codex and UNECE, including the USA little by little. So the EU's power is very much dependent on the subject matter.

We saw an example of this dynamic just recently with the IMO having the collective clout to tell the EU where to go - and New Zealand has just adopted Codex standards as the basis of its own food safety and export rules - and so that global single market is growing all the time. In food especially.

Meanwhile, there are several regional N-Cap car safety bodies all of which are gradually merging under the mantle of Global N-Cap. All of this is far more significant than TTIP which probably won't even pass. Just think about it. A global standard for vehicle design and safety features. Massive. Any car produced anywhere in the world by 2031 will be a saleable commodity anywhere on the planet. The same will be true of foodstuffs too, not least because of a global standard on refrigerated containers.

And with tariffs being already quite low the tendency is not to bother entering trade talks for the removal of tariffs when you can do more by establishing common standards and thus reducing transaction costs by a sum greater than that of the tariff.

Where it ends nobody knows, but it is part of the global trend toward continuous development and harmonisation of standards. By international law, if any goods meet the international standard and there is a recognised mutual agreement on compliance inspection then the EU may not refuse goods. So it's no longer the boss.

We will hear much in the coming weeks about the EU and its digital single market, but in most respects, we have one in the works, not at the EU level but at the global level - which needs further improvements not least to cut down on video piracy and counterfeit goods. We want a global agreement. Nobody is downloading hacks so they can access the French version of Netflix. Everybody wants the USA version.

So by 2031, there will be a nexus of global accords that completely surpasses the EU, to which the EU may not by law erect barriers. If anything, because of the EU's insistence on a common position, it is the slow man of the world in implementing standards and we lose out. That's why there were African states abolishing roaming charges before the EU.

The short of it is, by 2031, there will be less need for the EU than there is now. None at all in fact. What these global accords are is the manifestation of multilateralism and cooperation, whereas the EU is purely about establishing a country called Europe which speaks on behalf of all its members. That means our speed is pegged to the slowest ship in the convoy. If we are outside however, we can be at the cutting edge of standards implementation.

So when you hear the meme that other countries wouldn't be interested in trade talks with the UK, that's really nothing to get worked up about because they do tend their own delegations to these global forums - and so will we. Their very membership of these bodies means they will be talking to us because nothing gets done if they don't.

And that brings us back to this treasury report that essentially claims we will be frozen out of any future EU bilateral deals. I can't think of anything that matters less. Any agreements it makes will be to strong arm outsiders into adopting the global standard, not EU standards, therefore all they will be doing is bring on new nations on stream to the global single market - and in so doing weakening its own influence on global bodies by way of being a smaller proportion of the votes.

Since there is then an established commonality between all parties, WTO rules then take effect where the agreement can be replicated without even having direct talks. Were you to pin me down I couldn't tell you exactly how it all works. All I am saying is there is a growing trend for agreements to be replicated without the need for diplomatic missions. It's all just part of the daily business of the various global regulators and the WTO. By 2030, that is how most agreements will be conducted making things like TTIP positivity antique.

You can argue that being in the EU gives the EU extra clout, but here's the kicker - being out of the EU does not mean opposing the EU. We can choose to side with the EU or not. The bottom line is, the EUs hegemony in regulations and standards is coming to a close, and ultimately agility is far more valuable than the clout that comes with market size. And as part of Efta we are then part of the fourth largest bloc anyway with an independent right of veto. That really is the best of both worlds.

By 2031, the global single market will be entirely voluntary, accession will not be controlled by the EU and the EU will not call all of the shots. And if we are smart, it will be in our own interests to be spending our aid money on practical development assistance, helping lesser developed countries meet the standards in all sectors so that they can participate in global markets.

As alluded to in earlier posts this can range from port dredging to computerising container terminals or compliance assistance. Every new nation that comes on-line is one more voice stacked against the EU. The faster we work independently the more we can undermine the EU's control on the global single market. And that makes it a global community of equals each cooperating in accordance with their material needs rather than the desire to create an artificial region with borders and its own flag.

Effectively we will be handing the EU its redundancy notice and making it as relevant as the Commonwealth is now. (Not at all). And it won't even have a quasi-olympics held in its name. Nobody wanted it and nobody will miss it. Britain is better out of the EU - and the world will be better off when we consign it to the dustbin of history with all the other bad ideas.